In order to distribute your assets to your heirs after you pass on, your estate typically must go through a legal process known as probate. This can be a lengthy and expensive process, so many people look for ways to avoid – or at least streamline – the probate process.

A trust is one way to do this but you can also use payable on death (POD) accounts to bypass probate on certain assets such as bank and investment accounts.

Also called transfer on death (TOD) accounts or trust for accounts (ITF), these accounts allow you to include a beneficiary designation as part of the account documents. After your death, your beneficiary can simply go to the bank or the investment company with proof of your death (a death certificate) and can access the account.

Disadvantages of Payable on Death Accounts

Unlike a typical joint account, the beneficiary of your POD account cannot place any claims on the funds in the account while you are alive. However, the method is not without drawbacks:

• When you are naming a single beneficiary of your POD account, you are in effect disinheriting your other heirs which can create a rift in the family.
• If your beneficiary dies before you and you fail to update your account, then the account will be added to your estate at the time of your death and go through probate. If you have named two or more beneficiaries and the death of one beneficiary precedes yours, the bank/investment company will face a problem in dividing the account.
• If you later decide to make changes to your POD account, such as shifting it into your Revocable Living Trust, some institutions might want you to get the consent of the beneficiaries as well.
• Naming a beneficiary does not allow anyone to manage your account on your behalf if you become incapacitated, so your family may have to go through a conservatorship/guardianship process to manage your account and other assets.

Ultimately, you should consult an estate planning attorney to determine the best way to title your assets and provide for your heirs.

There are two distinct aspects to successful estate planning: planning and maintenance. Unfortunately, many people ignore the second piece and end up with estate plans that are out-of-date and sometimes even declared invalid.

So, why does your estate plan require maintenance?

Our lives are always changing. We marry, we divorce, we have children and grandchildren. We buy new homes, new cars and new jewelry and over time, we may accumulate new investments and property.  As a result, the estate plan you have today may no longer suit your needs this time next year but the only way to know for sure is to review your plan on a regular basis.

The first step to updating your Last Will and Testament is determining what changes need to be made.  Do you have new beneficiaries in your life, or has a beneficiary passed away? If so, you must update your Will to be certain there will be no confusion of property division during probate. You should also update this estate document any time you buy or sell property that is or should be listed in your estate plan.  If the circumstances of any beneficiaries have changed, you may want to change your plan.  A beneficiary who is getting divorced, has become disabled, or is having financial problems can have special protections to ensure their inheritance is preserved.

Once you have determined what you need to change you should meet with your attorney to determine your best course of action. There are two ways to change a last Will and Testament: – amend with a Codicil or create an brand new Will.

A Codicil is best for small changes such as beneficiary name changes due to marriage or changing your estate executor. If you wish to make large changes such as adding a spouse or drastically redistributing your assets your attorney may advise you to create a new Will. Your new Last Will and Testament will state that you revoke all previous Wills. This is an important feature to help avoid any confusion during estate probate.

Once you have updated your Will, you should safely store it and notify your estate executor of the location. If you have created a new Will, be sure to destroy all copies of old Wills. If you do not, there may be uncertainty at probate. This could occur if an old Will is found by your executor or other loved ones. They may assume there is no additional Will, and your official final wishes will not be considered.

The final step to updating your Last Will and Testament is to update all other estate documents to mirror those changes. This may include a Revocable Living Trust, powers of attorney, beneficiary accounts, and life insurance policies.

We recommend reviewing your Will or other estate plan with your attorney at least once every three years.

Has a loved one named you as the executor (or “personal representative”, in Colorado)of their Last Will and Testament? If so, you may wonder what your probate responsibilities will be. As the executor you will protect all assets, pay all debts, and pass inheritances to beneficiaries.

You must be honest, impartial and follow the letter of the law. You will have the guidance of your probate attorney throughout the process.  Before you even contact an attorney, however, you should find and list all estate assets, debts, accounts, properties, and guardians or beneficiaries listed in the Last Will and Testament.   Once you have a good picture of the entire estate, you can determine, with the help of an attorney, if the holdings are small enough for a shorter, simpler version of probate.

Once probate is open, you will have some estate maintenance duties. This includes paying regular bills, such as mortgages, upkeep of  estate property, and notifying all necessary agencies, account holders and bill collectors of the deceased’s passing.

You will also need to open a bank account in the name of the estate. This account will be used to pay all bills, attorney fees, court fees, and taxes. You must be very meticulous about your bookkeeping in order to maintain the integrity of the estate and to be fair to all beneficiaries.

Did you know you are also responsible for all taxes? You must file and pay income taxes for the deceased’s final year as well as for any years after that the estate earns money while probate is open. You will also be responsible for paying all state and federal estate taxes.

Once all bills, taxes and court costs have been paid and the court or your attorney give you the go-ahead, you may distribute estate holdings to the correct beneficiaries.  Be certain that all expenses have been paid, or any cost that comes up after the estate is settled must be paid by you.  In Colorado, the probate process takes an average of 9-24 months, so you need to be patient.

During the process you must be loyal to your loved one’s memory, able to settle any family bickering, and oversee all paperwork and activities to settle the estate promptly. Being the estate executor can be a big job, especially if documents are not in order or if it is a large estate. Always ask your attorney any time you have a question, and don’t forget your loved one truly trusted you to have named you to such a position.

When you first begin to plan your estate, you may feel a little overwhelmed at all the possibilities. But take a deep breath and relax… it’s easier than you think to get started.

Basic estate planning can cover most concerns of a typical estate. You can address both after death issues and protection in the event of disability with a basic plan. Anything beyond this is considered Advanced Estate Planning.

During the basic estate planning process, you have three decisions to make: who will inherit your stuff, who will oversee the process and what type of estate planning documents you want to use to accomplish your goals.

The best way to get started is to make a comprehensive list of all estate holdings and another list with all beneficiaries you wish to include in your plan. From these lists you will decide who will get what. You can even designate partial ownerships if you wish.

Next, with the help of your attorney, you can plan what type of estate documents you will use to meet your estate needs.  You can leave estate assets to your heirs in either a Last Will and Testament or you can use a Trust.  Which one is right for you will depend upon your needs. A trust for example, is typically a better choice when there are minor children or disabled dependents involved, or if you don’t want your loved ones to go through probate.

While you are creating your estate documents you will also need to name a personal representative or trustee depending on the type of document you have chosen. A personal representative, or estate executor, can be appointed in your Will and will help to settle your estate during the probate process. A trustee will not only care for your Trust after your death but will also make Trust decisions if you should be declared mentally disabled. You will also have to name a representative for other estate documents such as a Power of Attorney.

Once you have completed your basic estate plan, your attorney can advise if you should use additional planning tools for issues such as potentially high estate taxes, a disabled heir, or asset protection.

You can be the owner of property in three ways:

• as an individual in your own name
• jointly with one or more other people
• through contract rights

How your property is titled can make a big difference in how you plan your estate. The title will determine whether or not the property is included in the probate process and how the asset is distributed to beneficiaries.

If property is titled in your name alone and without any other joint owners, then the property would likely go through probate. There are exceptions to this of course, as certain types of assets do not go through probate because they can be distributed without court supervision. A life insurance policy for example, or a retirement plan does not require probate to be distributed to your beneficiaries.

If you are a joint tenant on the other hand, but your part of the rent or interest is owned by you alone as an individual – without any joint owners – then the value of your interest in the property would be probated.

How will the probate be conducted?

After your death, the probate Judge will appoint an Executor or Personal Representative as named in your Will. If you have not named anyone, the Court will appoint a person for the purpose. This Personal Representative will be able to access your estate and your accounts.

The process of probate will be guided by whatever wishes you have expressed in your Will. If you have not drawn up a Will then the laws of intestacy would be followed in determining the distribution of the estate.

There are several ways to avoid the probate process altogether. A qualified estate planning attorney can help you decide which methods will work best for you.

Understanding the difference between a living trust and a testamentary trust is essential to creating a trust that meets your goals.

A living trust is one that you establish and that takes effect while you’re alive.  In order to create a living trust, you’ll sign a trust document that identifies you, as well as the trustee you’ve chosen to manage the trust (usually yourself), and the beneficiaries of the trust.  The trust document also spells out the purposes of the trust, and lists the trustee’s powers and duties.  Once the trust document is signed by both you and the trustee, you’ll have to fund the trust.  This means transferring ownership of the property you want held by the trust into the name of the trustee.  Once this is done, everything is business as usual.  The beauty of a living trust is that if you become incapacitated, and when you die, there is no need for the legal probate process.

A testamentary trust is created under your will and doesn’t take effect until you die.  If you want to establish a testamentary trust, you’ll use your will to identify the trustee, the beneficiaries, and the purposes of the trust.  You’ll also identify the property to be held by the trust.  Once your will  goes through probate, the trustee will take control of the property and manage it on behalf of the beneficiaries you’ve identified.

An estate planning attorney can advise you as to which type of trust best meets your individual goals and needs.

A trust is essentially a “box” that can hold your assets. Instead of having the deed to your house titled in your name for example, the deed would be in the name of the trust, such as the Smith Family Trust.

This small change in how your assets are titled can provide some extensive tax breaks and can also protect your estate from going to a non-family member during a divorce or being seized in a lawsuit.

And here’s how it works:

There are three basic parties to a trust:

• The Trustor (also called a “Settlor”) who establishes the trust and provides the assets it holds
• The Trustee who manages the trust and its assets. This can be a person, a business or an organization.
• The Beneficiary who receives the benefit of the assets in the trust.

Now, these three parties do not have to be different people – quite the contrary, you can be the Trustor, the Trustee and the Beneficiary, allowing you to have complete control over your assets while still protecting them from a variety of third party claims.

The trust can be revocable, meaning you can change or even cancel it at any time, or irrevocable, meaning that once the trust is established, it’s there for good.

Trusts can also be used to provide for disabled dependents after you’re gone, by allowing them to benefit from the assets in the trust without affecting their eligibility for government-assistance programs.

Trusts can also help you avoid probate, a lengthy and often costly process of distributing assets after you pass on.

To learn more about trusts and decide if there’s one right for you, give us a call today.

If you are over 62 years of age and are unable to work, money is likely your primary concern. In the period prior to 1935, seniors suffered due to their dependence on their families and the state for financial support, especially when they had medical emergencies.

To ease this suffering, the federal government put into place the Social Security Act. This Act offers Americans who are 62 years or older a financial safety net in the form of Social Security. Under this system, you contribute to Social Security in the form of Federal Insurance Contributions Act (FICA) taxes while you are working and earning. When you retire and are unable to earn a living, you become eligible for the benefits under this Act.

While Social Security does not pay out enough to end all financial worries, it provides a supplement designed to ease the severe burden that seniors experienced before 1935.

Social Security – Forms of Benefits

Does this mean that you receive your Social Security benefits in the form of cash and you will again have to struggle with budgets for medical and daily expenses? No, Social Security makes things a bit easier for you, as your benefits include Medicare to help with medical expenses. Although Medicare is a separate program, you are eligible for it under Social Security because your FICA taxes contribute towards this program as well.

Social Security – How are Benefits Calculated?

Not everyone who is covered under Social Security gets the same amount of benefits. In fact, benefits are based on the amount of credits you earn over the period you were working. These credits are based on the amount you earned annually and are raised every year. In 2010, for every $1,120 earned by you, you will receive 1 credit. However, you cannot earn more than 4 credits in a year.

Since credits are based on your earnings, does this mean that you lose your credits when you take a break from a job? On the contrary, the credits you have earned will remain with you. However, these credits will not accrue further till you start working again. A change in your job has no impact on your credits.

Most people who were born before 1929 should have started receiving their Social Security benefits. However, those born after 1929 need 40 credits to be eligible for receiving Social Security retirement benefits.

New blog posts coming soon!